Exclusive: How BP Drafted Brussels' Climate Legislation PDF Print E-mail
Michael Gillard & Andy Rowell, 15 December 2010

Lobbyists for BP and other energy firms drafted climate change legislation that secured a nine billion euro subsidy from taxpayers, internal documents reveal.

The sum covers the entire cost of new technology for cutting carbon emissions from ‘dirty’ coal-fired power stations, saving energy firms from having to pay for it themselves.

Emails obtained by Spinwatch show how the industry cosied up to Chris Davies, the Liberal Democrat MEP responsible for drafting legislation on how to pay for carbon capture and storage (CCS) technology.

In the absence of political pressure on the industry to fund the clean-up itself, Davies drove through legislation which means the bill is being paid by taxpayers. The industry was so happy that it later gave the MEP an award.

Davies initially sought a fifteen billion euro subsidy from the EU’s Emission Trading Scheme (ETS) even though there were concerns, as he admitted in one email, that it had already “enabled companies involved in power generation to make excessive windfall profits at public expense.”

Emails from Davies to fellow MEPs show that at one stage he even threatened to "blackmail" the European Commission into backing the subsidy or he would block progress on its wider climate change package.

The disclosures come as winter fuel bills are set to rise for many UK consumers and energy firms face an inquiry by the regulator into suspected profiteering.

The emails reveal an intense lobbying campaign in Brussels which has now moved to Whitehall as many of the same firms seek to influence the outcome of sweeping reforms of the British energy market.

Davies, MEP for north west England, was appointed the EU rapporteur on CCS funding in January 2008. The EU has pledged to build 12 new power stations, some in the UK, using the novel technology as part of its commitment to reduce greenhouse gas emissions by 2020.

In his role as rapporteur, Davies had an open brief to come up with funding proposals in the knowledge that energy firms would not pay for CCS technology.

The emails show he immediately contacted industry players to “identify what levers needed to be pulled”. They told him “public money” was needed “as quick as possible” from a reserve fund for green energy worth thirty billion euros, which is attached to the ETS.

According to Davies, the idea to tap into the reserve fund came from Shell but London-based investment bank Climate Change Capital told him about it. However, it was Davies who decided on the size of the subsidy despite concerns it “might result in substantial and unnecessary subsidies being paid to companies that have, in many cases, already made large windfall profits through the operation of the ETS.”

The emails show that at Davies’ suggestion BP drafted wording for the funding package legislation. The MEP was also in close contact with lobbyists for the coal industry.

Coal is the most carbon intensive fossil fuel and plays a vital role in the UK’s electricity supply. Proponents of CCS say it could capture between 70 and 90 per cent of carbon dioxide emissions. The energy companies could also profit by charging the government to store the carbon dioxide by-product in their disused underground oil and gas wells.

The emails, which Davies voluntarily released, to Corporate Europe Observatory and Spinwatch, show that Euracoal, the umbrella organisation of the European coal industry, also helped draft the legislation dealing with storage and possible leakage of carbon dioxide.

Britain will receive a share of the EU subsidy for a CCS demonstration plant to be built in the UK. The coalition government has also earmarked one billion pounds of British taxpayers’ money for the project.

Chris Huhne, the environment secretary, will shortly announce whether a further eight billion pounds for other new CCS plants should be financed through a consumer levy on energy bills or direct public taxation. His department and the treasury are also due to reveal green energy proposals that include setting a floor price for carbon and an emissions performance standard that will put a limit on the amount of carbon dioxide any new power station fitted with CCS technology can emit.

David Miller from Spinwatch said: "We now know what happened in Brussels. The battleground has moved to Whitehall. There is heavy industry lobbying of the coalition to water down the emissions performance standard and Huhne, we hear, is already very receptive. "

Davies justified his actions by using a famous quotation often mis-attributed to Otto von Bismarck: “The public should never be allowed to see two things: How sausages are made and how laws are made.”

He said he was happy with industry lobbyists’ support in helping him frame the legislation. “They don’t draft the report, they come up with ideas and I turn them into amendments. Sometimes they put forward suggested wording and I use it if I like it. That’s how we work,” he said.

Davies believes his actions will help tackle climate change in Europe. He said: “China is building a coal-fired plant every four days, if we don’t develop this technology I don’t know where we are going to be... I regard this [legislation] as the greatest political achievement of my life.”

Read the full report by Corporate Europe Observatory and SpinWatch here.
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